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Wednesday, 8 December 1976

Mr SCHOLES (Corio) -We are discussing 2 Bills, which are largely machinery measures to deal with events that took place some time ago, and a statement aimed at undoing most of what was done as a conscious act by the Government in relation to tariffs throughout the year. The major matter before the House, quite obviously, is the statement made last night by the Minister for Business and Consumer Affairs (Mr Howard), and the ramifications of that statement and the events which led up to it. Some things in the statement deserve more explanation, and I think the House ought to consider other areas.

The decisions to devalue and to revalue obviously have consequences for manufacturing industry, which is the substantial recipient of tariff protection under the Industries Assistance Commission. Those decisions obviously confused the situation and they could have very serious long term effects on the Australian economy. Unfortunately the statement by the Minister does not clear up all that many of the effects on manufacturing industry. Certainly, in the short term, superficially at least, industry will benefit by an addition to the protection. I understand that in technical terms the Government's decision will bring the levels of protection back to approximately those which existed in about 1970. That may be true of some industries but not of others.

One of the things I would like to hear the Minister explain is the change in the tariff for the passenger motor vehicle industry. As I understand the statement, the additional 10 per cent protection, which was introduced as a result of a Temporary Assistance Authority report some time ago and confirmed as a permanent feature by the Government, is now being removed, but in fact the Government is retaining the quota levels of 80 per cent or will operate the quotas if imports exceed 80 per cent. The statement of the Minister appears contradictory, but I think that what I have said is most likely the effect of that decision. I draw attention to the fact that there is a considerable number of cars in bond in Australia. Those cars will be at a considerable trading disadvantage when they are released, because of the change in the tariff arrangements. The tariff on them will' not have been paid. I wonder whether that fact has been taken into consideration. In the short term at least there will be some advantage to certain importers who brought their full quotas of vehicles into the country- the number of these vehicles may not be as high as it was- in order to beat the emission controls. When those controls were to be introduced there was a substantial influx of vehicles and these were held in bond for sale after the date of the introduction of emission controls.

Another area where obviously the Government is not taking any action but in fact is removing certain things is that covering the British preferential tariff. The British devaluation has in fact altered the relative position. As I understand it, the removal of the British protective tariff merely restores that country's position to what it was prior to Australian devaluation. I am concerned with that part of the Minister's statement which indicates that certain industries, namely, footwear, clothing, textiles, domestic applicances, files and rasps, fine papers, plywood and orange juice will retain the additional temporary assistance which they were given previously. I am not sure of what the actual effects of this will be. However, in all probability it will mean that there will be an equivalent increase in

E rices to the consumer. In fact the Government as decided effectively to increase tariffs in that area beyond the level that the Temporary Assistance Authority had in fact recommended and which was adopted.

One area that I would draw to the attention of the Minister encompasses the wool textile industry and carpet manufacturing industry which have both been disadvantaged in a manner that, as I understand it, has not occurred in other areas of the textile industry. The wool textile manufacturers did not gain the benefit of the tariff protection to the same extent as did other areas because of the change in the domestic price of wool which was immediately increased by 17Vi per cent by direction of the Minister. As a result the cost of this industry's major raw material increased forthwith. The industry thus lost a substantial proportion of the benefit of the temporary assistance it received plus the benefits created by the changed currency situation.

The wool carpet industry is similarly affected in that it imports most of its raw material from overseas. A small quantity of carpet wool is grown in Australia but most of this material is imported. The cost of the industry's basic raw material has been increased by the devaluation decision. The industry has received no assistance comparable with that received by other sections of the textile industry or by its competitors which are making carpets from synthetics. Therefore, as the Minister would realise, the industry is already in considerable trouble. It is now placed in an adverse trading position compared with its Australian competitors which have not suffered the same price rise in respect of raw materials. The whole question of protection for manufacturing industry is one which I believe needs to be studied in far greater depth than is the case at the moment.

The measures before the House seek to validate a series of Industries Assistance Commission reports that have been adopted by the Government and a statement which almost invalidates all of those reports because the Government has determined to take action unilaterally which alters totally the considerations on which those reports and the legislation we are validating were established.

I am concerned about employment in Australian industry. I do not think that I have ever made any secret of the fact that I believe in levels of protection which are adequate to ensure that employment can be maintained and that Australian industry has a fair chance of operating, given that the conditions under which it operates are quite different from those existing for many of our trading competitors. I would challenge one statement made by the Minister; that is, that those industries which are aggrieved can seek assistance from the Temporary Assistance Authority. That is not a fact. Industries are able to seek assistance from the Temporary Assistance Authority only if their application to do so is agreed to by the Department of Industry and Commerce. That can be an extremely protracted and difficult proposition. The record of the IAC in this area is not good. I think that out of 13 applications that went before the IAC for temporary assistance last year 13 were rejected and a number of the industries concerned disappeared totally from the Australian scene. A number of applications have been made this year.

In at least on case of which I am aware the Prime Minister (Mr Malcolm Fraser) indicated that an application should be made because the Goverment had decided to adopt the IAC's report on commercial vehicles. This major Australian manufacturer was told that it could make application to the Temporary Assistance Authority for additional protection if it thought that such action was necessary. The application was made in March. The application had not been completely processed by the department concerned as late as August. It was never agreed that the decision on the application would be forwarded to the manufacturer concerned. In fact the decision finally came out when a new IAC report on the industry was called for.

I would suggest that temporary assistance, which by its very nature means urgent assistance, is not readily obtainable if an organisation has to wait for something Uke 8 months for a decision to be made on whether a reference to the Authority will be made in the first place. We also have to take into consideration the time factor required for the Authority to produce a report. It is reasonable that the Government should have some control over references. The legislation provides- and this requirement was insisted on by the present Government- that the Government cannot alter a recommendation on temporary assistance as opposed to a general report. But I would suggest to the Minister that an industry which is in trouble and which has to wait for 8 months to find out whether it will get a reference is hardly in a position to say that it is being dealt with fairly. Nor can we say that in such a case urgent assistance is obtainable. The Minister's statement appears to indicate that any industry that finds itself in trouble can in fact make an application. I would suggest that the position is something less than that.

I want to make only one other comment in this debate. I refer to the general pattern of IAC reports and the general pattern of action arising from those reports. At the moment it appears that the Government's POliCY and the general conclusions of the IAC are at some variance. References to the IAC, interim reports and final reports of the IAC, which are no longer always published before decisions are made, and Government decisions are almost always at considerable variance with each other. This situation must create serious problems in decision making within industry. An industry may first of aU see an interim report which indicates, as it sees it, all sorts of disruption. The final report may lead that industry to draw somewhat similar conclusions. This is the norm. But then the Government's decision may be quite different from the IAC recommendation. Such a situation must create planning problems within industry. The decision making process is usually spread over a fairly long period.

The textile industry has been dealt with fairly kindly in the Minister's statement. However, action taken by the Government may or may not save the industry because I do not think that a 17Vi per cent change in the currency rate will alter the competitive position of the industry in respect of imported goods. In fact I think that devaluation will make little difference to the margins on which importers operate, particularly in the case of the majority of cheaper textiles which are being sold over the counter. Devaluation will make a difference to the price that the public pays, but the margin between the Australian price and the price of imports in a number of areas is far greater than 20 per cent. In fact I think that a 100 per cent increase in the currency would be needed to make the industry competitive. Although such a situation would be completely unacceptable to the public, it is a consideration that obviously the Government and everyone else has to take into consideration. As I have pointed out, industry is faced with uncertainty over very long periods. The Government will have to keep this fact in mind if it is to encourage industry to implement more efficient processes.

We hear almost repeatedly in this House and outside blame being placed on employees for the difficulties in which industries find themselves. We are told that employees have gained a greater level of wages than some people think they are entitled to. I think we should also look at the fact that a considerable amount of Australian industry is geared to make a living for the management or the shareholders, without any real attempt to create a viable industry with long term prospects. Quite a lot of our industries are inefficiently structured. Much of the middle management is at least as blameworthy as the employees, if the employees are at all blameworthy. I suggest that no long term planning in any industry can take place while the degree of uncertainty that exists is repeated each year. No government is blameworthy in this area because no one can make up his mind, really, where he wants to go. In the early part of this century governments were made and broken on protection issues. At the moment it is a little different but not much different.

Certainly industry does not benefit by the IAC pursuing a policy which is diametrically opposed to that of the Government. The Government might have to lay down its policy requirements so they can be taken into consideration when the inquiries are taking place. At least the inquiry would be based on a situation in which the recommendations have some chance of acceptance by the Government. It seems unreal to me that we should have this situation with an organisation with the expertise and competence of the IAC. I do not deny the expertise and competence of members of the IAC. I disagree with most of their basic philosophies. There is no question of their competence and expertise in the field. If it is going through a substantial exercise of inquiring into an industry on a basis which it is known in advance the Government will not accept, this seems to me to be a complete waste of resources. It seems to me that somewhere along the line, if the Government's policy is different from the general philosophy being pursued by the IAC, there should be some way of bringing the two together. Useful reports, reports which are likely to be adopted, are far better than reports which are disruptive to the industry and which cause all sorts of disruptions and campaigns to be mounted. In the final result, the

Government overrides them anyhow. This is becoming a pretty regular pattern. I suggest to the Minister that some coming together of the Government and the IAC on their aims would greatly benefit all Australian industry. I think the statement by the Minister does little to clarify the situation relating to the future tariff policies or the effects of devaluation but, in view of the confusion that reigns supreme not only in industry in the country at large but also in the Government, I think it is the best the Minister could have made.

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